The Fire-and-Ice Stock Market Can’t Last Forever

Even with major stock indexes either at or near all-time highs, markets are in the midst of simultaneously pricing in both a speculative tech boom and a deepening U.S. recession as new coronavirus cases surge. New data and headlines suggests both sides of that narrative have merit, even if that doesn’t last for more than a few more quarters.

America's biggest banks started reporting quarterly earnings this week and are setting expectations for a much more prolonged slump than when they last reported their results. George Pearkes of Bespoke Investment Group notes that JPMorgan's loan loss provisions are growing faster than they did in the 2008 financial crisis that kicked off the Great Recession, in part due to new accounting rules. Optimists may point out that banks are better-capitalized than they were in 2008 and that the scale of federal relief given to households and businesses will prevent bank losses from being larger than they otherwise would be. Yet it's easy to see why investors would be concerned about the potential for further loan losses without any clarity on when the public-health crisis will end.